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When should be a change in the method of depreciation could be done? and how the depreciation must be calculated if such a change is adopted??

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تم إضافة السؤال من قبل Murtaza Sidhpur wala , Accountant and Inventory Manager , Khalid -Al-Dabbus Tailoring Material Co. W.L.L
تاريخ النشر: 2015/04/20
Murtaza Kalabhai
من قبل Murtaza Kalabhai , Accountant , Al Raj Mobile Phones Trading L.L.C

The method of depreciation is applied consistently to provide comparability of the results of the operations of the enterprise from period to period.

A change from one method of providing depreciation to another is made only if the adoption of the new method is required by statute or for compliance with an accounting standard or if it is considered that the change would result in a more appropriate preparation or presentation of the financial statements of the enterprise.

 

When such a change in the method of depreciation is made, depreciation is recalculated in accordance with the new method from the date of the asset coming into use. The deficiency or surplus arising from retrospective recomputation of depreciation in accordance with the new method is adjusted in the accounts in the year in which the method of depreciation is changed. In case the change in the method results in deficiency in depreciation in respect of past years, the deficiency is charged in the statement of profit and loss. In case the change in the method results in surplus, the surplus is credited to the statement of profit and loss. Such a change is treated as a change in accounting policy and its effect is quantified and disclosed